Like many businesses you may need to get some form of loan from a bank or other financial institution when you are in the early stages of setting up. Most lenders are generally interested in low risk borrowers so you will normally be expected to provide some form of collateral before they will agree to loan you any money.
It is very important to remember that all banks and other lenders have different lending criteria’s, loan terms and interest rates so it is very important that you take the time to shop around, you can save yourself a lot of money in the long run. Special deals for start up businesses are always on offer as lenders compete to tap into this potentially lucrative section of the business market.
It is also very important that you seek advice from an accountant or other financial adviser before you apply for your loan. They will help you to present your loan application in the best way to help improve your chances of success.
What Type of Loan Should I Apply For?
You need to be very clear about the specific purpose of your loan and how long you need it for. This information will ensure that you get the loan that is suitable for you. For example a retailer may wish to borrow money but not begin to repay the loan for 60 days or until he has been paid for his goods and would like to have the loan on short term.
A manufacturer may wish to borrow money for new equipment but would like to pay back both interest and capital slowly and regularly, perhaps over a 10-year period.
Many businesses are unclear about how much they need to borrow. You should be completely realistic about this and also allow yourself room for manoeuvre, it can be wise to allow for contingency capital, in case problems arise in the future.
Your customers may pay late or your suppliers are delayed in fulfilling your order so it is better to allow a buffer zone to your loan rather than default in your payments at a later date or have to apply for an extension because something unexpected arose.
The Criteria That Lenders are Looking For?
Most lenders are looking for the same criteria, are you a low risk finance proposition? Remember the lenders' 4 Cs when they consider loaning you money:
• Character: Do you come across as confident enough in your ability to service this loan? Do you appear to know what you are talking about or do you seem unsure of your territory?
• Capacity: Will you be able to repay your loan?
• Collateral: Are you providing security against the loan?
• Capital: How much are you trying to borrow and is this amount realistic?
When you do secure your loan you must know what type of loan it is and how much it is going to cost you, and, if it is a variable rate loan and the impact and increase or decrease in the interest rates will have on your repayments.
Bio Paul Flintoft is the marketing executive for the Self Improvement Centre, who provide business and personal development resources to help small and growing businesses start, manage and expand their business. The site contains books, audio programmes, library services, articles, coaching, free downloads and access to hundreds of useful resources. Paul is also one of the top distributors for UK based network marketing company Kleeneze.
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How To Get The Right Loan For You (UK) - To learn more about this author, visit Paul Flintoft's Website.
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